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Tax-Deferred Retirement Plan

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Tax-Deferred Retirement Plan
A retirement investment plan in which a contributor does not pay taxes on contributions until after withdrawal at retirement. That is, one places a portion of his/her pre-tax income into a retirement account that allows it to be invested. Taxation is deferred until withdrawal from the account following retirement. Presumably, one's tax rate will be lower after retirement because one's income is usually lower after retirement. Common examples of tax-deferred retirement plans include IRAs and traditional 401(k)s. Some employers make matching contributions to these plans.


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Keep in mind that if you are in the 32% tax bracket, you'd need to pull out $147,058 each year from a tax-deferred retirement plan, in order to equal $100,000 you take from a Bank On Yourself plan.
In fact, if you look at the numbers--and consider how little you're going to get from Social Security (for most of us, the equivalent of roughly $13,000 a year)--you'll realize that if you're not participating in some other kind of tax-deferred retirement plan, you can't afford not to have an IRA.
The first new 403(b) regulations in 40 years will increase employers' role as sponsors of these tax-deferred retirement plans, with respect to investments, transfers, documentation, plan administration, and participant disclosures, according to Lincoln Financial Group.
 
 
 
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